Dairy Australia - Hay and Grain Prices

Dairy Australia - Grain and Hay Report - Week Ending 31 January 2014

This report has been commissioned by Dairy Australia to provide an independent and timely assessment of grain and hay markets in each dairying

International & National Summary - Grain:

Despite market movements throughout the week, international wheat futures ended the week flat. Aiding Australian values the Aussie dollar came off a meager 0.0047 USc to close at 87.54 USc. The slight downside in the dollar added about A$1/t to March Chicago values, closing on Tuesday night at A$237/t.

International trades continue to occur in large volumes at prices competitive to current Australian levels. Egypt bought 240,000t of Russian and US soft red winter wheat overnight. A tight shipping stem in Southern states isn’t allowing Australian vendors to even submit bids to these tenders. Australian exporters are currently unable to deliver to buyers when required due to these logistics restrictions.

In a similar situation, the recent cold snap and freezing temperatures in Canada is causing a bottleneck as logistics fail to cope with the extreme conditions. Despite a record harvest exports have not been able to execute and the country is now faced with burdensome ‘carry in’ stocks. While this has been supportive to Australian values, when the northern hemisphere spring arrives logistics will free up and an influx of grain could be available to the market. This will add further competition to Aussie exports with the potential to pull our prices lower.

Australian values have continued to defy Chicago movements over the past three months as domestic factors have instead influenced price. As the northern hemisphere spring arrives expect the supply of wheat to become more liquid and CBOT to return as a leading indicator for Australian values. There is potential to see a correction to international values, which could see downward pressure on Australian prices.

Domestically Australian feed values seem to have flattened out following the price hike over the last two weeks. It appears in northern Australia feed barley prices have reached a cap with it now being affordable to execute shipments from either Victoria or South Australia. Expect north-eastern Australia feed barley values to follow SA price movements at the current premium. The price correction over the last week and slight fall in values may make some growers willing sellers and be an opportunity to secure grain for end users. Recent rains will also add to grower’s willingness to part with grain in a period where many have been content to store their remaining stocks.

In the southern export oriented states feed values have plateaued from last weeks rise. Export merchants posting aggressive bids drove the recent demand. Anecdotal evidence suggests many end users locked away required quantities for later delivery early in the harvest period. With many growers holding limited grain purchasing for later delivery is recommended. With prices at profitable levels a high percentage of growers are prepared to conclude their sales for the year in the coming month.

Reports indicate there remains a significant quantity of quality affected grain remaining in on-farm storage across the eastern seaboard. Continue to be vigilant for any remaining frost-affected grain from Southern NSW down to southern Victoria.

National Summary - Hay:

It is becoming increasingly clear that protein hay supplies will be tight in 2014. Any buyers seeking protein hay for later in the year are encouraged to source their requirements now to avoid paying high spot market prices later in the year.

This week we have had reports of Queensland buyers sourcing hay from as far as Northern Victoria and South Australia. This is likely to put pressure on supplies, and impact prices in these regions later in the year.

Northern Australia:

Atherton Tablelands and South East Queensland are still reporting steady demand for hay. Feedlots are active buyers.

Fodder supplies are low right across Northern Australia.

With low cattle prices and some growers entering their second or third year of drought buyers are now looking for cheaper feed sources such as sorghum stubble to meet demand.

Southern Australia:

Rain earlier this week will assist summer crops in parts of Northern Victoria and Southern NSW.

Demand for hay from Queensland may put pressure on supply and prices for hay in the southern regions later in 2014.

Despite increased interest in lucerne hay over the past few weeks there is still buyer resistance for lucerne hay in Victoria and South East South Australia upwards of $220-$240t on farm.

At this stage many growers in Victoria and South Australia are opting to store their hay until later in the year and considering their own hay requirements before looking at their marketing options.

There are large quantities of pasture hay available resulting from the big yielding pasture hay season. Prices may continue to ease in the coming weeks as a result of this good supply.

Western Australia:

Hay trading is fairly slow on the domestic market although there is a small amount of interest in cereal hay.

Lucerne hay is in short supply.

Straw production is now complete with big yields and good quality being reported.